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bigduckontax
bigduckontax, Accountant
Category: Tax
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I am starting a business and it has two lines to it. The first

Customer Question

I am starting a business and it has two lines to it. The first is an IT consultancy, the second is property. For the first I will start a limited company and register it for VAT. The second I intend to buy some commercial property and let it out. My question is, if I use the same company for both, will I have to charge/pay VAT to my commercial property letting customers?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

The decision as to whether to charge VAT on property rentals rentals is fraught with difficulty. Most organisations opt not so to do for one very simple reason. Were they to charge then when they come to sell at some future indeterminate date they will have to charge VAT on top of the sale price and if the buyer isn't registered for VAT then they will have to pay an extra 20% and may well jib at that! Only the very biggest commercial property businesses tend to opt to charge VAT on rentals.

My personal opinion would to be to create two separate companies for this exercise. After all it only costs an annual charge of 13 quid each to operate. You can still register the property company for VAT to enable you to reclaim input VAT. You need not opt to charge VAT on rents, but any other services provided eg utilities would have to be invoiced with VAT at the appropriate rates as normal. It also protects the other business if one side goes pop, does happen you know!

I approve a Sage; it's absolutely brilliant and dead easy to operate. I run a number of companies on this platform It will do all your VAT returns for you and even produce draft final accounts, although I tend to work off its trial balance at the year end for this, but I am an old fogey who was trained to use this method.

I do hope I have thrown some light on your question.
Customer: replied 3 years ago.

Thank you, ***** ***** helped a lot. I will create a separate company for each line.


Regards,


 


Chris

Expert:  bigduckontax replied 3 years ago.
Delighted to be of assistance, Chris.

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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

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